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Court Construes 35 U.S.C. § 272 for the First Time

January 29, 2004

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Last Month at the Federal Circuit - February 2004

Judges: Clevenger (author), Mayer, and Schall

In National Steel Car, Ltd. v. Canadian Pacific Railway, Ltd., No. 03-1256 (Fed. Cir. Jan. 29, 2004), the Federal Circuit reversed a district court’s preliminary injunction in favor of National Steel Car, Ltd. (“NSC”) against Canadian Pacific Railway, Ltd. (“CPR”).

NSC owns the patent-in-suit, U.S. Patent No. 4,951,575 (“the ‘575 patent”), which is directed to a depressed centerbeam flat railway car used to haul lumber. CPR is a Canadian railroad company that owns rail lines in the United States and Canada, and intended to use depressed center-beam flat cars to carry lumber shipments from Canada to the United States. For destinations beyond CPR-owned rail lines in the United States, CPR’s flat cars are switched to trains powered by U.S.- owned locomotives. CPR’s flat cars would spend over half of their time in the United States before returning to Canada.

NSC initiated the instant suit and moved for a preliminary injunction. The district court determined that NSC demonstrated a likelihood of success on the merits, and that CPR’s defense to infringement under 35 U.S.C. § 272 and its invalidity defense lacked substantial merit.

Under § 272, the use of certain foreign-owned means of transit or transport for “temporarily” entering into the jurisdiction of the United States is not an infringing use under certain conditions. In rejecting CPR’s defense under the statute, the district court considered the means of transport to be the entire train, which would occasionally include U.S.-owned locomotives. Further, the district court found that CPR’s flat cars were not “temporarily” present in the United States because they spend a majority of their time delivering lumber to United States destinations and because CPR would derive significant benefits from using the accused rail car in the United States. The Federal Circuit rejected these two findings and instead determined that the accused flat car is a “vehicle” within the meaning of the statute. Further, the Court defined a vehicle entering the United States “temporarily” as a vehicle entering the United States for a limited period of time for the sole purpose of engaging in international commerce.

Having construed the language of § 272, the Federal Circuit concluded that NSC had not demonstrated that CPR’s defense based on § 272 lacked substantial merit at this preliminary injunction stage.

In support of its invalidity defense, CPR argued that the invention of the ‘575 patent was obvious in view of two U.S. patents issued many years earlier. The district court concluded that at the time the ‘575 patent was invented, there was no suggestion, teaching, or motivation to combine these two patents. The district court rejected CPR’s use of two sources— one being a technical drawing, the other being testimony about an oral technical disclosure—predating the application for the ‘575 patent to demonstrate the requisite motivation to combine, concluding that these sources had not been disseminated so as to gain prior art status.

Noting that motivation can be found in the knowledge generally available to one of ordinary skill in the art, the Federal Circuit found the prior art status of the two sources irrelevant. Instead, the Court ruled that the two sources are relevant to determining what was implicit in the knowledge of one of ordinary skill in the art at the time of invention of the ‘575 patent, and concluded that the two sources suggest that one of ordinary skill in the art would have been motivated to combine the two prior art patents. The Federal Circuit, therefore, held that the district court abused its discretion in granting the preliminary injunction because CPR’s defenses have substantial merit.